Why we’re in it for the long term

In June last year, an Insurance Times editorial greeted news of the PBS Holdings and Longhawk merger with the rallying cry: “And so the fightback starts.” It went on to argue that the merger could signpost the future shape of MGAs as “lean, mean, and capable of wringing value out of the persisting soft market”.

Nearly 12 months on, the editor should pat himself on the back. MGAs have had a bad press, often with good reason, but new business models will change the way the sector is perceived.

Of course, reappraisals don’t happen overnight, but a new generation of responsible MGA is emerging, conscious of its past reputation and keen to move forward. UK General Insurance (the brand replacing the merged PBS and Longhawk businesses) is one of them – and we are determined to prove that we add real value in niche and specialist markets.

At its core, the new MGA still reaches the parts that others cannot: writing specialist business, taking advantage of distribution capability and operating on a low cost base. Lean and mean is de rigeur in this soft market, but not at the expense of underwriting excellence.

We have also listened to our brokers, who have emphasised the need to nurture our specialist knowledge. We have hired new talent, in the main from traditional insurers, to create a centre of excellence in our Leeds headquarters.

We want to focus on our strengths, because compromising underwriting profitability year on year will be to the long-term detriment of our business and our relationships with brokers. Expect the new model MGA to make more of its specialisms and demonstrate its understanding of the nuances of niche market segments, such as agriculture, social housing and niche commercial. To sum up: ‘We have to do it well or not at all’ is not a motto critics would expect from the typical ‘here today, gone tomorrow’ MGA of the recent past.

First-class service to brokers is critical; seamless IT interfaces, clear policyholder-friendly documentation and rapid claims processing are basic requirements in this highly competitive market, but high-quality service must be backed by a commitment to building relationships with brokers, anticipating their needs, rather than merely responding to them.

So far, so sensible, but the crucial change is our new focus on long-term relationships with providers and brokers, and a preparedness to share risk. The old-world MGA renewed its capacity provision annually, which drove a short-term perspective. As a specialist insurer, our approach is to copy our broker strategy and develop long-term relationships with full authority from the provider. Furthermore, in taking on a degree of risk, we must adopt the same disciplined approach to pricing and underwriting as traditional insurance providers.

A renewed focus on disciplined pricing and underwriting will drive growth and profitability and, should that growth be sustained, an improved reputation for the new breed of MGA, or specialist insurer, will inevitably follow.

It takes a while to build a reputation but, over time, the new-model MGA will be in a stronger position and able to make a positive contribution to the broader general insurance sector in the UK.

Hard markets always attract chancers, but success in soft markets requires commitment and responsibility. Time will tell whether the evolving model will bear fruit, but we have a new confidence that, in aping the best aspects of our insurer peers and adding our own specialist skills, the specialist insurer may finally come of age. IT

Michael Warren is chief operating officer of UK?General Insurance Group.